HEG Q1 FY27 earnings call

Global steel production showed signs of gradual stabilization in H1 CY26, declining marginally by 0.7% YoY to 931 million tons. Notably, steel production outside China expanded by 2.1% to 431 million tons, indicating a supportive demand environment for HEG's products. India emerged as a strong performer, with crude steel output increasing by 7.1% YoY to 87 million tons in H1 CY26, driven by robust domestic demand from infrastructure, construction, and manufacturing. Matured economies like the US and Germany also recorded solid recoveries, with growth rates of 6.3% and 9% respectively.

The medium-to-long-term outlook for graphite electrodes remains highly positive, primarily driven by global decarbonization policies. The accelerating shift from carbon-heavy blast furnaces to lower-emission electric arc furnaces (EAFs) is a significant tailwind. Approximately 71 million tons of new EAF steelmaking capacity is planned globally for completion between now and the end of 2028, which will substantially increase demand for graphite electrodes. HEG's ongoing expansion to 115,000 tons, expected to be operational by early 2028, positions the company to capitalize on this structural demand growth.

HEG demonstrated strong operational efficiency, running its plant at over 90% capacity utilization in Q1 FY27 and expecting to maintain this level in subsequent quarters. The company achieved a significant sequential recovery, with stand-alone EBITDA improving from a loss of INR 126 crores in Q4 FY26 to a positive INR 211 crores in Q1 FY27. This recovery was attributed to improved realizations from product and geographical mix, disciplined cost management, and continued focus on operational excellence, leading to a 53% YoY increase in stand-alone PAT to INR 110 crores.

HEG's Greentech segment is advancing with several key projects. The anode project (TACC), with a total capex of INR 2,200-2,300 crores, is slated for commercial production in Q1 FY28, targeting 40-50% capacity utilization in its first year and projected revenues of INR 600-700 crores with a 35% EBITDA margin. Further graphite electrode expansion of 10,000 tons, requiring INR 800 crores capex, is planned by 2029. Additionally, a 75 MW hydro project is expected in 2.5 years and a 300 MW solar project within 18 months, contributing to a target of 4-digit EBITDA from all Greentech businesses by 2030.

HEG maintains a robust financial position, remaining debt-free with no long-term loan borrowings and a treasury of approximately INR 858 crores as of June 30, 2026. This strong liquidity provides the company with financial flexibility for future growth. The composite scheme of arrangement for the demerger is progressing well, with the NCLT having reserved its order. The company anticipates providing an update on the timeline and record date for the demerger once the order is officially pronounced.